Case Note & Summary
The petitioners, Asha Mehta and another, were judgment debtors against whom Allahabad Bank had obtained a decree for recovery of Rs.33.51 crores with interest. The Bank initiated recovery proceedings and attached several properties, including Flat No.603 at Ruby Apartments, Walkeshwar, Mumbai. The Recovery Officer conducted a sale of the flat, which was confirmed on 20 November 2009. The petitioners filed an application objecting to the confirmation, which was dismissed by the Recovery Officer. The appeal before the Debt Recovery Appellate Tribunal was also dismissed. The petitioners then filed a writ petition under Article 226 of the Constitution challenging the order of the Appellate Tribunal dated 2 August 2010. The main grounds of challenge were that the sale was conducted at a grossly inadequate price and that there were material irregularities in the conduct of the sale. The court examined the facts and found that the sale price of Rs.1.75 crores was not so inadequate as to shock the conscience, especially considering that the property was sold in execution of a decree and the petitioners had failed to bring any better offer. The court also held that the petitioners did not prove any substantial injury caused by the alleged irregularities. The court further held that the Recovery Officer had the jurisdiction to confirm the sale even if objections were pending, as the confirmation was not premature. The court dismissed the writ petition, upholding the sale confirmation.
Headnote
A) Debt Recovery - Auction Sale - Confirmation of Sale - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 28, 29 read with Second Schedule to Income Tax Act, 1961, Rules 52, 53, 60, 61 - The petitioners challenged the confirmation of sale of their flat on grounds of inadequate price and irregularities in the conduct of sale. The court held that the sale price was not so inadequate as to shock the conscience, and no substantial injury was proved. The court also held that the Recovery Officer had the jurisdiction to confirm the sale despite pending objections. (Paras 1-10)
B) Debt Recovery - Sale of Mortgaged Property - Inadequacy of Price - Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - The court held that mere inadequacy of price is not a ground to set aside a sale unless the price is so low as to be unconscionable. The petitioners failed to demonstrate that the property would have fetched a higher price if sold in a different manner. (Paras 5-8)
C) Debt Recovery - Irregularities in Sale - Substantial Injury - Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - The court held that even if there were irregularities in the conduct of the sale, the sale cannot be set aside unless the petitioners prove substantial injury. The petitioners did not lead any evidence to show that they suffered any injury. (Paras 7-9)
Issue of Consideration
Whether the sale of the mortgaged property should be set aside on the ground of material irregularities and inadequacy of price, and whether the Recovery Officer and the Appellate Tribunal erred in confirming the sale.
Final Decision
The High Court dismissed the writ petition, upholding the order of the Debt Recovery Appellate Tribunal and the confirmation of sale by the Recovery Officer.
Law Points
- Auction sale cannot be set aside on grounds of inadequacy of price unless it is so inadequate as to shock the conscience of the court
- mere irregularity in sale does not vitiate sale unless substantial injury is proved
- Recovery Officer has jurisdiction to confirm sale even if objections are pending
- principle of caveat emptor applies to auction purchases.
Case Details
2010 LawText (BOM) (11) 83
WRIT PETITION NO.6465 OF 2010
DR. D.Y. CHANDRACHUD, ANOOP V. MOHTA
Mr. V.R. Dhond with Mr. Mayur Khandeparkar, Mr. T.N. Tripathi and Ms. Sapna Rachure i/b T.N. Tripathi & Co. for the Petitioners, Mr. Naresh S. Fadia for Respondent No.1, Mr. Harihar Bhave i/b Bhave & Co. for Respondent No.7, Mr. Sanjay Jain with Mr. Devanshu P. Desai, Mr. Nivit Dhruva, Mr. Prakash Shinde, Mr. Avinath S. Gautama and Mr. G.K. Tripathi i/b Mr. Anoopkumar Sharma for Respondent No.10, Mr. Purav Damania for Respondent No.11, Mr. Prakash Mehta Director of M/s. Bulls Ventura Pvt. Ltd. and Mr. Uttam Bagadi Bidders present in person.
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Nature of Litigation
Writ petition under Article 226 of the Constitution challenging the order of the Debt Recovery Appellate Tribunal confirming the sale of a mortgaged property in execution of a decree for recovery of debt.
Remedy Sought
The petitioners sought to set aside the order of the Debt Recovery Appellate Tribunal dated 2 August 2010 and the confirmation of sale by the Recovery Officer.
Filing Reason
The petitioners alleged that the sale of their flat was conducted at a grossly inadequate price and with material irregularities, and that the Recovery Officer and Appellate Tribunal erred in confirming the sale.
Previous Decisions
The Recovery Officer dismissed the petitioners' objection to confirmation of sale on 20 November 2009. The Debt Recovery Tribunal upheld that order. The Debt Recovery Appellate Tribunal dismissed the appeal on 2 August 2010.
Issues
Whether the sale of the property should be set aside on the ground of inadequacy of price?
Whether the sale was vitiated by material irregularities causing substantial injury to the petitioners?
Whether the Recovery Officer had jurisdiction to confirm the sale despite pending objections?
Submissions/Arguments
The petitioners argued that the sale price of Rs.1.75 crores was grossly inadequate compared to the market value of the property, and that the Recovery Officer did not properly advertise the sale or obtain a proper valuation.
The respondents argued that the sale was conducted in accordance with law, the price was adequate, and the petitioners failed to prove any substantial injury.
Ratio Decidendi
A sale in execution of a decree cannot be set aside merely on the ground of inadequacy of price unless the price is so low as to shock the conscience of the court. Even if there are irregularities in the conduct of the sale, the sale cannot be set aside unless the judgment debtor proves substantial injury. The Recovery Officer has jurisdiction to confirm the sale even if objections are pending, as long as the confirmation is not premature.
Judgment Excerpts
The challenge in these proceedings under Article 226 of the Constitution is to an order dated 2 August 2010 of the Debt Recovery Appellate Tribunal.
The Recovery Officer by an order dated 20 November 2009 dismissed an application filed by the Petitioners objecting to the confirmation of a sale.
The terms and conditions of sale were settled in pursuance of the provisions of Rules 52 and 53 of the Second Schedule to the Income Tax Act 1961 which is made applicable by virtue of the provisions of Sections 28 and 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Procedural History
Allahabad Bank filed Original Application 183 of 2004 against the petitioners for recovery of dues. The Debt Recovery Tribunal allowed the application on 1 September 2005 for Rs.33.51 crores with interest. A recovery certificate was issued on 17 October 2005. On 17 December 2007, the Recovery Officer attached three properties including Flat 603 at Ruby Apartments. On 9 April 2009, the Bank informed about another mortgaged property. The Recovery Officer conducted a sale and confirmed it on 20 November 2009, dismissing the petitioners' objection. The petitioners appealed to the Debt Recovery Tribunal, which upheld the order. The Debt Recovery Appellate Tribunal dismissed the appeal on 2 August 2010. The petitioners then filed the present writ petition.
Acts & Sections
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993: 28, 29
- Income Tax Act, 1961: Second Schedule, Rules 52, 53, 60, 61
- Constitution of India: Article 226
